AUDUSD

AUDUSD Live Chart

AUDUSD traded mixed against its G10 counterparts during the European morning Monday, reflecting the indecisive mood of investors ahead of the much anticipated Fed and BoJ policy meetings later this week.

The greenback was higher against CHF, SEK, GBP and AUD, while it was lower vs JPY and NOK. The dollar was virtually unchanged against CAD, EUR and NZD.

The Australian dollar continued its advance, bolstered somewhat by the higher oil prices and the technical break above the psychological area of 0.75.

During the early Asian session Tuesday, we get the minutes of the Reserve Bank of Australia’s September meeting minutes. At that meeting, the Bank kept its policy rate unchanged as was widely expected and maintained a neutral tone overall.

It would be interesting to see if the minutes point to a neutral bias as well with regards to future policy actions. Another neutral overall report, which suggests that the Bank may remain sidelined for some time and acknowledges the recent improvement in the country’s economic data, could prove enough to support further the AUD/USD advance.

AUDUSD breaking above the resistance

AUD/USD edged north during the European morning Monday, breaking above the resistance (now turned into support) hurdle of 0.7530 (S1). In my view, that break confirmed a forthcoming higher high and turned the short-term picture somewhat positive.

I would expect the bulls to continue pushing the price higher and perhaps test the 0.7565 (R1) resistance soon. A decisive break above that hurdle is possible to carry more bullish extensions, probably towards the next resistance of 0.7600 (R2). Our short-term oscillators detect upside momentum and corroborate my view.

MACD turned positive

The RSI emerged above its 50 line, while the MACD, already above its trigger line, has just turned positive. Zooming out to the daily chart, I see that on the 15th of September the pair rebounded from the upside support line drawn from back at the low of the 20th of January. This is another reason I believe that the pair is poised to continue trading higher for a while.

Fed and BoJ to dominate the week The meetings of the Fed and the Bank of Japan are likely to dominate this week, with investors hoping for some clarity on the BoJ’s easing program and the Fed’s normalization path.

The Fed is widely expected to keep its rate hike powder dry. Slowing jobs growth in August, lackluster retail sales, a flat core PCE rate, as well as the collapse in both of the ISM PMIs, have taken a hike at this meeting off the table, in our view.

Even the modest upside in the August CPI was not enough to boost the very low market expectations for a hike this week. What’s more, the latest signals from various FOMC members have been conflicting to say the least, suggesting that a consensus to raise rates is unlikely to be reached.

As such, the focus will turn to the updated “dot plot”, the new economic forecasts and Chair Yellen’s press conference following the meeting.

Trading The AUDUSD

Only day traders look at the short-term outlook. The AUDUSD 200 daily moving average is in an uptrend. The 200 mov. ave. is a strong and reliable signal. We can call this a bottom for the AUDUSD. It is time to take a risk. Buy.

Next Target price (Buying Position):

From 0.77760 to 0.78237

Factors Influencing the AUDUSD

An increase in the demand for Australian exports, is likely increase the value of the Australian dollar.

Rise in cost of goods and services could reduce the demand for Australian dollars.

Interest rate and capital inflow.

Monetary policy

Price inflation

Retail sales

Higher demand for Australian imported goods and services and an increase in capital outflow can puts downward pressure on the value of the Australian dollar.

The Australian economy is heavily dependent on the export of mineral and agricultural products, such as wheat and wool.

Australia’s largest export markets are Japan, China, South Korea, India and the USA. Any economic news from this countries could affect the AUD positively or negatively.

Confidence and sentiment

Economic growth (GDP)

Balance of payments

Commodity prices. As the price of commodities rise – the Australian Dollar strengthens and when commodity prices fall the currency also weakens.

China’s economic outlook.

The AUDUSD Negative Correlation:

The AUDUSD tends to have a negative correlation with the following currency pairs: